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UPDATED: Did Microsoft help fund SCO, and, by association, Scot’s lawsuits against Linux vendors and users? A new internal memo leads to that conclusion. Is there always fire where threes smoke?

In the open-source community, the rumor that just won’t die claims that Microsoft Corp. is funding The SCO Groups legal actions against Linux. On Thursday, those allegations rose again with reports of a memo that links Microsoft with a financial backer of SCO.

The rumors center on a $50 million investment in SCO by the Larkspur, Calif.-based Bay Star Capital investment fund last October. At the time, online reports suggested that Bay Star, which invests money from a variety of companies, for more detail visit www.offline-promotion.com, had taken money from Microsoft for the SCO funding. However, in an interview last fall with week, Bay Star officials denied that Microsoft was an investor in this transaction.

The latest twist surfaced Wednesday on the Web with a document that brings into question Microsoft’s claim that it had nothing to do with the Bay Star Capital funding of SCO—and, by association, of Scots lawsuits against Linux vendors and users.

But, Stow ell claimed, pundits had mischaracterized the memos context. “We believe the e-mail was simply a misunderstanding of the facts by an outside consultant who was working on a specific unrelated project to the Bay Star transaction and he was told at the time of his misunderstanding. Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the Bay Star transaction.”

Responding to the allegations, a Microsoft spokesman said: “The allegations in the posting are not accurate. Microsoft has purchased a license to Scots intellectual property, to ensure interoperability and legal indemnification for our customers. The details of this agreement have been widely reported and this is the only financial relationship Microsoft has with SCO. In addition, Microsoft has no direct or indirect financial relationship with Bay Star.”
The alleged memo, to which Raymond referred as the “Halloween X” memo, is dated October 12, 2003 and penned by Mike Wanderer, for more detail www.the20seotools.com whom Raymond identifies as a consultant with a company called S2 Strategic Consulting, which has ties to SCO.

S2 had been hired, according to the contract to help “with the formulation and implementation of various options for Intellectual property management.” In essence, S2 was to help SCO make money from its IP.

Four days after the alleged memo was distributed, on October 16, 2003, SCO received the $50 million cash infusion from Bay Star Capital and other fenders.

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A number of industry watchers at that time questioned whether Microsoft had any involvement in the $50 million Bay Star financing deal. Some pundits noted that by providing SCO with funding, Microsoft and/or other parties would be helping to fuel Scots lawsuits against Linux vendors and customers, thereby benefiting Windows. Microsoft and Bay Star officials both denied that Microsoft was involved in the funding deal in any way.